Hamilton’s ongoing update of its development charges has revealed much more than just a huge growth subsidy being paid by existing taxpayers. It has also unveiled details of massive infrastructure expansion plans in a city unable to maintain what it has already built.
As added intrigue there are disturbing hints that the provincial government is about to change the rules about growth fees to reduce developer costs and create another crisis in municipal financing. At stake in Hamilton is anticipated growth-related spending over the next dozen years in excess of five and a half billion dollars.
Both the size of development fees and any exemptions from paying them are obviously a big deal for both the developers and the cities that collect them. Provincial legislation governs the basic calculations of how much can be collected and allows cities to provide various exemptions.
A key step in the process is estimating the costs of hundreds of projects expected to be needed to service new growth and determining how much of that can be collected in development charges. For example, the background study for the current review reveals that the planned Elfrida expansion east and south of the Rymal and Upper Centennial intersection has a price tag exceeding a third of a billion dollars.
The biggest slice of that is expansion of existing roads to the tune of $130 million, but there’s also nearly a $100 million in stormwater management, a $27 million community centre, over $10 million for a fire station and vehicles, $7 million for a library and a similar amount for development of new parks. Add in $55 million for water and sewer pipes and the bill climbs past $340 million – all forecast to be in place by 2031.
Development charges can be collected from builders for much of this spending – if and when residences are built – but there are various deductions that cut into that revenue and result in some of those growth costs being borne by existing taxpayers. For the roads portion, for example, 15% of the spending is deemed to “benefit existing residents” and therefore deducted from the amount the city is eligible to collect in development charges.
Then the remainder of the charges are divided evenly between residential and non-residential expansion even though the Elfrida area is expected to be almost entirely residential. It wouldn’t matter in terms of monies collected except that city council has decided to discount non-residential industrial charges by 40 percent. The net result is that the city may only be able to recoup $88 million from DCs instead of the $130 million that the road expansion will actually cost.
It may not get that if the provincial government changes the rules in mid-game as it has already in other municipal matters – from the slashing of Toronto city council in mid-election, to the threatened and now withdrawn opening up of the Greenbelt, to the currently proposed re-write of the Golden Horseshoe growth planning rules. Development charge legislation may be next on their agenda suggested the city’s lead consultant during last months DC debate.
“The province has started another process on reviewing development charges” as part of its promise to make housing more affordable, Gary Scanlon told the January 25 meeting of the development charges stakeholder sub-committee. Scanlon is a lead partner in Watson and Associates, the company that has repeatedly done the background studies and recommendations for Hamilton’s DCs and which does similar work for many other Ontario municipalities.
“The province is going through a lot of discussions,” explained Scanlon. “They’re considering whether they want to do away with development charges or reduce them as part of their affordability plans. We’ve just gone through some extensive discussions, so it could be something that arises from that. Right now I think the new government is reviewing a whole bunch of things and until I know what the changes are it’s difficult to evaluate them.”
This could be in line with video revelations during the provincial election campaign of Doug Ford making promises to a meeting of big developers that he would open up the Greenbelt to make house building easier.